Organization-Wide Physical Asset Management. Dharmen Dhaliah
a high-level, big-picture, and long-term approach that spans across the whole organization. Given that physical asset management does impact many functional areas in an organization, it makes total sense that a strategy in some form is critical and should come before any physical asset management plan. A well-crafted and well-communicated strategy will achieve consistency and promote collaboration, two key aspects for successful implementation of physical asset management plans.
While reading the paper, Darren starts to realize that this is absolutely true when he looks back at how he actually approached his first Ironman race. He remembers setting the goal and developing a three-year strategy to get to the fitness level required to participate in his first Ironman race. The three-year strategy was broken down into strategies for different aspects of the race, e.g., strategies for swimming, biking, running, nutrition, and equipment and gears required. For example, one of the strategies he had was to focus on “try-a-tri” distance in the first year, a sprint distance in the second year, and an Olympic/long distance in the third year. To execute the overarching strategy and meet his goals, Darren remembers developing training plans for the different strategies with realistic goals to achieve over the years. He realizes that if he hadn’t had an overall strategy in place, but instead started working with only training plans, he may have found himself all over the place with his fitness and performance. Maybe he could have been successful with some luck ... But it is never a good idea to leave things to luck.
Neel talks further about the lack of understanding of the importance for organizations to have a strategic asset management plan. He compares how other functional areas have a strategic approach as well as a plan in place to deliver results, while the physical asset management field seems to be somewhat lagging behind. Very often you will hear about corporate strategy, finance strategy, human resources strategy, or even IT strategy. What about a physical asset management strategy? he argues.
Neel elaborates on what a strategic asset management plan should consist of and what role it plays. First of all, he highlights one caveat that practitioners should be well aware of: the difference between an asset management strategy and a strategic asset management plan.
Neel further clarifies that an asset management strategy is the strategic approach that an organization takes to realize maximum value from its physical assets. It ensures that alignment across all functional areas allows coordination in delivering asset management activities and promotes collaboration during decision-making processes to achieve a common goal.
On the other hand, Neel explains, a strategic asset management plan consists of applying strategic actions to deliver the asset management objectives derived from the organizational strategic objectives. It is a high-level, long-term action plan that includes objectives for managing the organization’s physical assets.
The draft paper goes on to describe the process of developing a strategic asset management plan, arguing that, in order to develop a plan, it is necessary to apply the asset management strategy to “something with a goal.” The “something with a goal” is the physical asset stock and the value the organization wants to derive from it. This means that, in advance, the organization needs to know the physical assets it owns, their current conditions and risks, the estimated service lives, and the estimated rehabilitation and replacement costs required to maintain them in good order to deliver the required levels of service at minimum risk.
In addition to that, organizations need to know what value means to the external and internal stakeholders. This is important so as to be able to determine the organization’s physical asset management objectives. Usually for proper alignment, the organizational strategic objectives are converted into physical asset management objectives which would relate to effectiveness of the physical asset management system as well as the performance of physical asset classes/systems. Neel finds that this is an area where significant work needs to be done and there is general confusion about what physical asset management objectives should be. He cites two examples—one for a physical asset management system and the other for a physical asset system:
• To apply an optimized decision-making process for future capital investment
• To achieve 90% reliability in the processing plant
Neel argues that the issue is that organizations do not do a good enough job at documenting physical asset management objectives. The main reason is that physical asset management is not seen as a strategic initiative, and as a result their objectives are either buried in other functional areas or are sometimes neglected outright.
To build a sound strategic asset management plan, Neel reiterates that organizations need to look at the following two key components:
1. The physical asset management strategic approach the organization needs to take to ensure alignment
2. What the organization owns in terms of physical assets and what it will take to keep them in a state of good repair
Neel’s paper stresses the importance of having both components developed in sequence, as one feeds and informs the other to produce a solid SAMP document.
“What is this again that you have bought?” Debbie looks at Darren while holding a white package in her hands.
Darren grabs it from her and starts ripping the packaging apart to open it. Debbie stands there, both hands on her waist watching him. Darren takes the item out of the box and holds it in his hand turning it around a few times as if he is inspecting it. He has bought a new nutrition pouch for his tri-bike to replace his older pouch, which he does not like any more. This new pouch fits on the frame of the bike in front of him, is a little bit roomier, with compartments, and, on top of that, is more aerodynamic.
“You always have money to spend on these things!” Debbie exclaims with her hands still on her waist. “For the last two years I have asked you to redo the laundry room with proper cabinets and to install recessed lighting outside the house. I am still waiting for these things. You keep telling me we have to save money for that, and yet I see that you are spending money left and right on your triathlon things.”
Debbie is right. For the past few years, Darren has spent a small fortune on things for the triathlon—his bikes, wetsuits, trisuits, and shoes; his swim, bike, and run apparel; and different gears and accessories, plus the cost of training programs, registration fees for races, and the travel expenses to attend those races. All these little things add up over time and can become a significant separate budget.
As a result, he has a ton of triathlon junk in his basement, in the garage, and in his closet that needs to be sorted out. Maybe Darren should start with doing an inventory of what he has, assess the condition things are in, select the ones that bring value to him to keep, and identify those that can be disposed of.
Darren shakes his head and decides to deal with his triathlon asset management stuff later. For now, the main thing is to escape Debbie’s wrath and let her cool down. Darren gives Debbie a big smile, and, without a word, he makes his way in the basement where he has his bike set up on his trainer. Within minutes he installs the nutrition pouch on the bike frame and jumps on his bike to start riding along with a group of cyclists online. He is riding on one of his favorite circuits, the Volcano Climb. He gets into an aero position and cruises downhill, with the volcano in the background spitting large streams of red-hot lava. He loves the beautiful scenery as he rides hard with drops of sweat trickling from his forehead.
“Wake up! Wake up!” Darren hears a voice in the background calling. He opens his eyes and sees Debbie standing over him and smiling. Darren is confused and does not understand where he is. The last he knew, he was just on his bike in the middle of a ride. After a few seconds he realizes that he had dozed off while reading Neel’s paper. He looks at the clock and notices that it is half past noon.
“We won’t have time for lunch,” Debbie says. “Darren, you have to be ready quick; otherwise we will miss the start of the movie.”
He actually forgot that they are supposed to go out today to the movies. The show they are targeting starts at quarter to two. He better get ready quickly, and